Lightbridge Corporation
Q4 2013 Earnings Call Transcript

Published: 28 Mar 2014

[Operator:]

Good day ladies and gentlemen and welcome to the Lightbridge 2013 Business Update Conference Call. At this time, all participants are in a listen-only mode. (Operator Instructions) I would now like to turn the call over to Gary Sharpe, Lightbridge’s Head of Investor Relations. Please go ahead.

[Gary Sharpe:]

Good morning and thank you, Destiny. Welcome to the Lightbridge’s 2013 Business Update. Our earnings news release and Form 10-K were distributed after the market closed yesterday, and both of those documents can be viewed on the investor relations page at Lightbridge.com. Seth Grae, our CEO, will lead today’s call. In addition, the following executives are available to answer your questions. Jim Guerra, our CFO and Chief Operating Officer; and Andrey Mushakov, Lightbridge’s Executive Vice President for International Nuclear Operations. I must remind you that today’s presentation includes forward-looking statements about the company's competitive position and product and service offerings. During the course of today’s call, words such as expect, anticipate, believe, and intend will be used in our discussion of goals or events in the future. These statements are based on our current expectations and involve certain risks and uncertainties that may cause actual results to differ significantly from those estimates. The risks include, but are not limited to the degree of market adoption of the company’s product and services offerings, market competition, dependence on strategic partners, and the company’s ability to manage its business effectively in a rapidly evolving market. These and other risks are set forth in more detail in Lightbridge’s filing with the Securities and Exchange Commission. Lightbridge does not assume any obligation to update or revise any such forward-looking statements whether as a result of new developments or otherwise. You can participate in today's call two ways. First, you can submit questions for management in writing to [e-mail]. If you’ve already submitted a question, we thank you. You can also submit them at any time during the prepared remarks or during the Q&A period. Second, after the prepared remarks, telephone lines will be open for live questions. Now let’s get to it. Here is Seth Grae, Chief Executive Officer of Lightbridge Corporation.

[Seth Grae:]

Well, thank you Gary and good morning everyone, and again that e-mail address for question is [e-mail]. Our summary of Lightbridge's progress in 2013 was distributed last night after the close of trading. We also filed the company's Form 10-Q with the Securities and Exchange Commission. I won’t repeat all those details now. However, there are a few key strategic points I want to emphasize before we open today's call for your questions. First and foremost, Lightbridge’s prospects are so promising because of the compelling value proposition we offer to the power generation industry in general and specifically to the essential and growing global nuclear industry. Our innovative fuel technology and value adding advisory services can solve the toughest problems facing the commercial nuclear industry today, namely increased safety and enhanced operating economics. Only Lightbridge's patented metallic fuel design offers nuclear utilities the benefits of increased power output from existing and new reactors, reduced nuclear waste, improved safety, and enhanced proliferation resistance of spent fuel. Further, our comprehensive advisory services are helping existing clients with on-time, on-budget development and safe regulation of nuclear power plants in countries where expanded electricity generation is needed. Next, development of the company's fuel technology continues to advance and achieve important strategic milestones. A U.S. patent issued last month for Lightbridge’s unique fuel rod design and fuel assemblies now provides broad protection for our future royalty revenue stream. The stage is set domestically and internationally for even more progress in 2014 and the development of Lightbridge’s innovative metallic nuclear fuel technology. Productive and encouraging negotiations continue with fuel fabrication partners, particularly in the U.S. and also in Russia and elsewhere. Our talks with the Babcock & Wilcox Company are advancing on joint development of a pilot scale fuel fabrication facility in the United States. B&W is well known for excellence as a provider of nuclear fuel and reactors to the U.S. Navy. Partnership with Lightbridge represents important growth potential in commercial nuclear for B&W. Lightbridge-fabricated fuel in the United States could be provided to domestic and global markets. We are pleased with the progress of our negotiations in these initiatives and expect to have more news to report on these facets of our fuel R&D this year. We received questions about the economics of our metallic fuel designs. Essentially, Siemens calculates in their report available on the investor relations portion of the Lightbridge website that it would be a one-time approximately $85 million total cost for first of a kind transition to Lightbridge fuel for a pressurized water reactor in the United States. Subsequent similar reactors are expected to cost less. With the added revenue and reduced costs from the power uprate and longer fuel cycle, it would take approximately two years for a reactor to breakeven on that one-time $85 million cost and less time for subsequent reactors, which translates to an internal rate of return in excess of 40%, over and assumed 20-year operating lifetime of the reactor. More than ever, there is market interest in the U.S. and elsewhere in Lightbridge's nuclear fuel technology. Due to hydrofracking in Fukushima, nuclear utilities are even more concerned about cost and safety. Our company’s technology is designed to create value by addressing the major issues facing nuclear fuel fabricators and utilities. China's premier recently declared war on air pollution. There and elsewhere, nuclear power will be a growing base load source of electricity that does not pollute the air so long as the reactors can compete with coal and natural gas and are safer, we are encouraged by the market interest we are seeing in Lightbridge. Moving on, our advisory services business remains well positioned to grow in 2014. Expansion of the global commercial nuclear energy sector has resumed. As more governments recognize the crucial importance of commercial nuclear as a clean source of base load power, Lightbridge's reputation continues to spread for expert counsel in the design and implementation of comprehensive civil nuclear regulation and construction programs. Our expert consulting team began new work in late 2013 under a two-year subcontract with Lloyd's Register Group to provide independent re-verification of equipment and material procurement processes at nuclear power plants operated by Korea Hydro and Nuclear Power Company. This contract plus other small assignments resulted in sequential increase in revenue of $0.4 million in Lightbridge’s consolidated fourth-quarter revenue from the third quarter of 2013. Although the amount of revenue increase is small in absolute terms, we believe the difference represents a larger change to greater market demand for commercial nuclear advisory services. We are actively engaged in talks to provide consulting services to other governments interested in deploying nuclear power. More proposals are before the relevant agencies, and we expect responses about potential new consulting assignments soon. Revenue from Lightbridge Advisory Services help support ongoing R&D of our fuel technology. The capital markets also recognize the promise of Lightbridge's fuel technology and value-added advisory services. With $3.9 million in net proceeds from each efficient and successful registered direct offering in the fourth quarter of 2013, we improved the company's financial strength, flexibility, and liquidity and are funding the ongoing research and development of our patented metallic fuel design and our proprietary fabrication process. Now let’s open the call to your questions. Remember, in addition to asking live questions by telephone, you can also submit questions in writing to [e-mail]. We will pause while the operator, Destiny, reviews the procedure for asking live questions.

[Operator:]

(Operator Instructions)

[Seth Grae:]

And while we wait for live questions, Gary Sharpe, who is in charge of our investor relations will proceed with questions that we received via e-mail.

[Gary Sharpe:]

Here is a question for the team, Seth. Is nuclear power the only way to address the air pollution crisis in China?

[Seth Grae:]

Nuclear power is not the only way to address the air pollution crisis in China, but it is necessary and the air pollution crisis in China cannot be solved without nuclear power, without a massive increase in nuclear power. What we're seeing in Chinese cities is replacing coal in buildings with natural gas, eliminating some of the street level pollution from barbecues et cetera, those are sort of small things. On the bigger scale, we’re seeing coal plants closing in cities. We’re seeing other factories close in cities such as steel plant in Beijing. And we’re seeing a massive build-out of nuclear power, particular along the east coast of China with a significant number of new reactors ordered. As we said a few minutes ago, the premier of China literally declared war on air pollution. That was his phrase about two weeks ago, and nuclear power is an enormous part of that program. The growth of China's existing cities and the movement of people from the Western provinces into new cities is creating a massive increase in need for electricity in China, and as Chinese leaders have recently said they are literally killing themselves from air pollution, there. is nothing else that can be done with the massive base load energy generation that China needs other than replacing coal with nuclear, without massive displacement of coal plants. Nuclear plants in and near China's biggest cities, the air pollution program won’t work. From what we’re seeing in China, I think, they will get there but it will take time. It takes time to build new reactors.

[Gary Sharpe:]

Here is another question from the e-mail. The writer is asking, are there plans to seek U.S. government’s funding instead of financing from private investors.

[Seth Grae:]

Right. The history of funding of the company since we’ve become a publicly traded company was $13 million in a registered direct in 2010 and almost $4 million last year, so about $17 million in equity funding, no debt. But about -- and it’s got to be about $53 million now in consulting revenue, in that time more than 40% gross margin, so probably in the neighborhood of about $23 million of cash that we generated on our own, our margin on our consulting as compared to about $13 million in equity. The government money, we've received along the way, and we have received some has not gone directly to Lightbridge. It’s gone to partners of ours at U.S. National Labs, at U.S. companies we work with at Russian institutes to advance our work. Any future government funding would have to be something similar to that, I think. I don't think it's likely that it would go directly to us. We actually do receive a very small amount of government funding right now. As I mentioned during my remarks, there are some other small contracts we’ve started. We do some advising to the U.S. Department of Energy for small amounts now on nuclear energy related issues, on nuclear fuel issues that we get paid for, but not a great amount and that’s revenue to us, not government funding in a sense nor a grant. I think that when you look at the past government funding we've had in the several million dollar level in aggregate to our partners to advance the project, going forward, if there's government’s support for building nuclear fuel fabrication facilities or something along that line, it could be greater. But again, I think it's more likely to go to our partner companies than directly to Lightbridge. Andrey, I don’t know if you want to add to that?

[Andrey Mushakov:]

Yeah. I think that’s a good way to put it. DOE typically in both our experience as well as experience of other major entities that work with DOE, DOE typically covers certain types. It’s always a cost sharing type of arrangement where commercial entities are usually expected to contribute 50% or more of the total amount of funding required. Sometimes, contributions (inaudible) for that contribution from the commercial sector. But typically, DOE likes to contribute funding for process fees for some analytical work or experimental work that U.S. National Laboratories can perform and get involved in regulatory licensing work, things like that.

[Seth Grae:]

And I'll just add one quick last comment on this, which is that Lightbridge owns all of the intellectual property. We own the patent rights, no one else does. To our fuel designs and to the methods for making our fuel, with government funding, we have to be careful on any rights that would come in under government Federal march-in rights. We don't have that problem now. It’s just something we would be very careful about in the future.

[Gary Sharpe:]

All right. The next written question, we’ve received, variations on this. Along this line, how is Lightbridge’s outlook influenced by tensions in the Ukraine and the likelihood of potential sanctions?

[Seth Grae:]

Well, there are no sanctions that have impacted Lightbridge, and certainly we’ve seen nothing in any of our work that's been directly affected by it. That being said, we’re very sensitive to political matters. We follow them closely. We have what I would call an equivalent of portfolio diversification in our work and that we have parallel tracks in the United States, in Russia, and discussions we are having in China and elsewhere. So that when and if over time, there are disruptions with anything caused by politics, which has not happened to us and we have no indication that it will, that we do have other paths that they would not stop our work. I will say particularly relating to work that we’ve done in Russia, it's been tremendously beneficial to the company. And that over the years, we've had worked done for much less than it would've cost in other places and done much faster than we would have done in other places, so we have those benefits in the project. The first Russian exports of Uranium to U.S. reactors started in 1985 before the Berlin Wall fell in ‘89 and before the end of the Soviet Union in ’91. And in various ways, it’s continued ever since in nuclear civil commerce between the two countries, including tens of thousands of nuclear weapons worth of highly enriched uranium. It was downblended and used in U.S. reactors. Jim Malone, our Chief Nuclear Fuel Development Officer, when he was Head of Nuclear Fuel for Exelon disposed 5,000 Soviet warheads worth of highly enriched uranium. It was downblended in Exelon reactors in the United States. And in the entire history of this program, going back to 1985, there has never been a single disruption due to politics, and I think this is because nuclear in general, including civil nuclear, is an area that the United States and Russia just continue and have not impacted by sanctions or political problems. And going back to 1985, there have been some very serious political problems. So again, we don't have any problem right now at our Moscow office. We don't see any coming. If one were to come someday, we have alternatives.

[Gary Sharpe:]

Here’s another question from the Internet. Are there any roadblocks to obtaining international patents?

[Seth Grae:]

None that we’ve seen. Main patent that Lightbridge will ever receive in its history is the one we’ve received last month. This is the one we've been waiting for, the metallic fuel rod and metallic fuel assemblies with all of our claims granted for the benefits that relate to the economics and safety. It is literally this patent that we will license to generate most of the company's revenue going forward. Few other filings now under the Patent Cooperation Treaty, particularly in Europe and Asia but really around the world where nuclear fuel is produced, where nuclear reactors are used, where nuclear reactors or nuclear fuel could be. In the future, there will be more coverage coming in. But no, there's been no roadblock. The patents are being granted as I said, the Mainland’s already been granted, and we continue to receive other patents. We don't notice all of them publicly. Just two weeks ago, we received our patent from China on the seed and blanket designed with thorium fuel. And this is something we had applied for a while ago, have received. We have also received the U.S. coverage on that, and that’s something of interest in some markets. But no, the answer is no. We see no roadblock. In fact, the main patent risk in this company that we've identified which is our main U.S. metallic fuel patent. It is in a sense now retired as a risk and that patent was granted last month.

[Gary Sharpe:]

There are - we’ve been flooded with questions from the Internet. Let me get to this long list here.

[Seth Grae:]

Why don’t we start off of by just asking Destiny? If you have any questions stacked up there as well, we have a lot here.

[Operator:]

We do not have any questions.

[Seth Grae:]

Okay, so they are all coming in here. Okay.

[Operator:]

We do have one question that just popped up.

[Seth Grae:]

Okay. I will take that one and then we will go back to the list Gary is receiving.

[Operator:]

Okay. We have a question from Joe Lascala of Aegis Capital. Your line is open.

[Joe Lascala:]

Hi, everybody. Congratulations on the quarter.

[Gary Sharpe:]

There are - we’ve been flooded with questions from the Internet. Let me get to this long list here.

[Seth Grae:]

Why don’t we start off of assessing, Destiny? If you have any questions stacked up there as well, we have a lot here.

[Operator:]

We do not have any questions.

[Seth Grae:]

Okay, so they are all coming in here. Okay.

[Operator:]

We do have one question that just popped up.

[Seth Grae:]

Okay. I will take that and then we will go back to the list Gary is receiving.

[Operator:]

Okay. We have a question from Joe Lascala of Aegis Capital. Your line is open.

[Joe Lascala:]

Hi, everybody. Congratulations on the quarter.

[Seth Grae:]

Thank you.

[Joe Lascala:]

Just had a question regarding some language that I see popping up here in the K versus the Q of last time with regards specifically to the agreement that you are looking to sign with the fuel vendor. It seems like in the K, you had alluded to early 2014 and now you backed of that little bit now just say that you are looking to sign that in 2014. Can you give us some color to why there is little pushback there?

[Seth Grae:]

Let me give you my own read on that, which is what we originally started with, was looking at the feasibility of deploying such a plant in the United States. I would say at this point, we are beyond that. We are really now looking at citing in commercial terms. So what we were talking about in the Q was whether we would see that it would be feasible to do. Now, we're looking at something much, much more than that. I can't speak for other companies, but I'll say that that’s my read on what we're doing right now. And Andrey, I don’t know if you want to add on that?

[Andrey Mushakov:]

Yes. I want to add something, some sort of a new positive developments that happened over the past couple of months and now we’re in discussions with Babcock and Wilcox. And that’s partly the reason why I think is the language that we put in the 10-K, that’s partly because of that, which is when we originally sort of discussed that collaboration as Seth pointed out that it was to look at whether it was feasible or not. Now it’s -- the discussions have shifted towards more of a site study, basically of each site and whether we can use some of the existing facilities of Babcock and Wilcox for our work, at least for some of the initial work including for example, fabrication of short-lengths fuel samples that we would fabricate here in the United States as sort of another option in addition to Russia . So that’s why you see that somewhat changed because the scope of work is changing, sort of the focus of the work is shifting to some extent. They are focusing more on this particular option of fabricating short-lengths fuel samples here in the United States and what needs to be done and the work of the existing sites this can be done.

[Seth Grae:]

Right. So that would be shorter-lengths rods for the test reactors been made in existing facilities as well as what we refer to back in the Q as the feasibility on building the plan to make the full size commercial fuel in the U.S., which is we say has advanced really beyond feasibility canal looking at which site. Did you have a follow-up to that, Joe?

[Joe Lascala:]

No, that answers my question. Thank you. I do have a follow-up on a separate quick topic if you don’t mind.

[Seth Grae:]

Sure.

[Joe Lascala:]

Things like the stock really reacted very positively to last week’s Chinese announcement and then backed off a little bit. Do you think that rather -- I know you weren’t probably commenting your stock price, but do you think investors got it right initially that the comments out of China is a direct, very large opportunity for your company?

[Seth Grae:]

Well, of course, we think our investors get it right when they do think. I would say that China is an enormous area of opportunity for Lightbridge, both in our consulting and our fuel. For work inside China and elsewhere, working with Chinese state owned companies. I was last in China about three weeks ago at meetings there. As I said about two weeks ago, our Thorium Power, Inc. was granted by China. I think that it was China’s announcement that you’re referring to really is part of, is one of several follow-ups to China’s Premier’s announcement that they are declaring war on air pollution and that nuclear power is a big part of it. And the Chinese Academy of Sciences, which is what’s in the announcement you’re referring to, is looking at future advanced new reactor designs with thorium and fuels. The major mainline Chinese nuclear companies that are state owned as opposed to the Academy of Sciences, the mainline companies like China National Nuclear Corporation, China General Nuclear Corporation. They are building, deploying, and ordering new light water reactors, all pressurized water reactors within the category of light water reactors. So within the timeframe of what will give benefit to our stockholders, it’s fuel for these light water reactors which we’re focusing on are metallic fuel, there is also the options for our thorium fuel. Within these new and advanced reactor concepts, they won’t be deployed commercially and available in a large scale for several decades. So while we do have some involvement on some of those efforts in terms of applicability of some of our technology, we focus on fuels for pressurized water reactors in China and elsewhere.

[Joe Lascala:]

Okay. Thank you very much.

[Seth Grae:]

Thank you.

[Gary Sharpe:]

Well, let’s move on to this question. So it’s in light of your work for the United Arab Emirates, are there opportunities to do work in Saudi Arabia for the consulting services business?

[Seth Grae:]

Right. Our consulting services business is started in the United Arab Emirates in 2008 and continues, and we intend to work there for as long as there is a program there. It’s been a wonderful experience for us. From there, we also started doing some work nearby in Kuwait and then we did work for the Gulf Cooperation Council, which is six countries in the region, of the United Arab Emirates, Oman, Qatar, Kuwait, Saudi Arabia and Bahrain. So in a sense, we’ve already done work for Saudi Arabia as a member of the Gulf Cooperation Council that we’ve done some work for and much of that work was based in Riyadh, where the Gulf Cooperation Council itself is based. In terms of work specifically for Saudi Arabia, we have not done work specifically for Saudi Arabia outside the context of the Gulf Cooperation Council. Saudi Arabia has not yet formally made the decision whether to proceed with nuclear power. There is an entity called K.A.CARE, it stands for King Abdulaziz City for Atomic and Renewable Energy that there is focusing right now on solar and looking at nuclear. They are deploying solar and considering nuclear on behalf of the Government of Saudi Arabia. We do meet with them periodically, we talk with them and it is possible we could be involved there at some point in the future. But at this point, we don’t even know if or when the decision will be made to go forward with nuclear power in Saudi Arabia.

[Gary Sharpe:]

All right. Next question. I will paraphrase this because it’s long and have a lot of detail. So in an interest of revenue, let me just say that the Lightbridge fuel work in small modular reactors that are being considered for development. And does your fuel also work in boiling water reactors?

[Seth Grae:]

Okay. There are different types of small and modular reactor concepts. The ones that are receiving funding and commercial backing and government funding in going forward are all light water reactors, pressurized water reactors just about half length fuel. So yes, because we are designing a light water reactor fuel, pressurized water reactor fuel, it can work in small reactors. And in fact, the benefits I think could be tremendous in small reactors, not only bringing the safety advantages of our fuel, but the economic advantages I think are even more pronounced and that nuclear power has economies of scale. The larger the reactor the less it tends to cost per unit of electricity generated by that reactor, the smaller the reactor the less it cost to build the reactor in capital costs, but it tends to cost more per kilowatt of electricity that the reactor generates. So in a world where small and modular reactor designs were arrived at before the advent of hydrofracking, before the fall of the wholesale price of electricity, they seem like a more economically viable idea than they even do today. And I think Lightbridge’s fuel would be very pronounced in economic benefits it would bring to light water small and modular reactors. There are some other small and modular reactor designs that are not light water reactors, that are much more future looking, different types of reactors, be it liquid fuels, gas fuels, different things, but there are few rods not working, but I don’t think those will actually be commercially deployed. In terms of boiling water reactors, yes, our fuel can be adapted. It will work in any type of light water reactor we have been designing for pressured water reactors, because that’s the overwhelming majority of the market. As I said, every reactor in China is a pressurized water reactor and they are not going to order any boiling water reactors, and that’s almost case around the world, especially since the largest concentration of boiling water reactors in world is in Japan where most of them are shutdown. So yes, it can work in those reactors. And when we have orders for those from our fuel fabrication partners, I have no doubt they will be able to provide that. Andrey, if you want to add to that?

[Andrey Mushakov:]

All right. It seemed you covered this.

[Seth Grae:]

Okay, great.

[Gary Sharpe:]

All right. Next question. What’s the timeline for a new capital raise?

[Jim Guerra:]

Well, there isn’t a timeline for new capital raise. We had a raise. We took in about $3.9 million net in October, most of that money is in the bank. We expect our consulting revenues, as we said it was up a bit fourth quarter, nothing to write home about, I think about $400,000, but we see that increasing going forward. And we are in the running for some significant new contracts we hope to win, so we turn to that first as well as commercial deals relating to fuel. As I said, if you want to look it as a ratio since we became publicly traded, say about $23 million to the company’s bottom-line from our consulting business as the margin on about say $53 million of revenue shaking in from that and about $70 million total and what we’ve taken in raises. I don’t know what the ratio would be going forward, but we have no immediate plans. I will say that we are opportunistic when we do raises, when the market conditions are good, when it seems that it’s a good time to do it. We never want to be in the position of given your raise because we have to. So it’s possible, but something will happen later in 2014 or 2015, but no, we don’t have any current time schedule for that.

[Gary Sharpe:]

All right. Next question. Are the power upgrades that your fuel enables due to higher temperatures?

[Seth Grae:]

Are they due to higher temperatures?

[Gary Sharpe:]

Right.

[Seth Grae:]

Yes and no. In order to get more power out of the same core of the reactor, it is because you have higher temperature at surface of the fuel rod where it’s touching the water. However, it’s lower temperature overall by about 1000 degree Celsius in our fuel rods because the uranium dioxide are called ceramic pellets inside the current fuel rods are really not good at thermal conductivity of transmitting heat or coldness through the rod. So they are just piping hot at the center of the rod and it’s cooler at the edge of the rod where it touches the water with our metallic fuel which has a more uniform temperature throughout the rod. Even though we are actually about a 1000 degree cooler overall when you look at the totality of the rod, where it touches the water at the surface of the rod, it’s cooler. So let me also ask Andrey to give a little more of a technical answer on that as well.

[Andrey Mushakov:]

Yes. Basically the fuel rods generates our fuel rods, the one that we will use for say 10% power upgrade or along the fuel cycle would generate more heat. So in terms of heat generation, yes, that’s correct. In terms of the temperature of the fuel rod, say, if you look at the average temperature of our fuel rod versus the average temperature of conventional uranium dioxide fuel rod as Seth pointed out , the average temperature in our case is roughly 1000 to 1100 degree Celsius lower compared to conventional uranium dioxide fuel. The reason why we can generate more heat from our fuel rod without exceeding operating any of the, sort of safety concerns or violating any of the safety margins, comes from the fact that our fuel rod has roughly 35% increase in the fuel rod surface area. So the surface area because our fuel rod has a proprietary (inaudible) geometry, that geometry creates roughly 35% more of the surface area from which the heat can be removed by the coolant compared to standard conventional cylindrical fuel rods used by conventional fuel. So as a result of that, the surface heat flux, which is a function of how much heat has been generated in area of the surface, say in one square centimeter, that’s the surface heat flux. So our surface heat flux in fact is lower than the surface heat flux for conventional cylindrical rods in the case of a 10% power upgrade. Because as I mentioned, the increase in the surface area for our fuel rod is 35%, whereas increase in the power output by 10%. So there is actually an extra margin left in terms of the surface heat flux with respect to our fuel rods. But you can utilize up to 30% of that increase in the surface area, if you have taken above new builds, nuclear power plants in which case you can increase the power output of those new build plants by up to 30%. And still have a somewhat lower surface heat flux, which is important for safety margins.

[Gary Sharpe:]

Here’s a related question. Does the lower operating temperature of the Lightbridge metallic fuel rod translate into diminished cooling water volume requirements?

[Seth Grae:]

Andrey.

[Andrey Mushakov:]

Okay. I can take that. No, I’ll give some of the more detailed answer. Basically, the amount of coolant water, what power plants requires is actually a function of the amount of heat introduced inside the plant . For example, a power plant producing 4,000 megawatts of thermal energy will require the same amount of coolant, whether it’s a nuclear plant whether it is a fossil fuel plant. Typical pressurized water reactor, for example, has three separate coolant loops. The primary loop heats the water the coolant as it passes through the reactor core, passes through the fuel. This heat is passed to the secondary loop via heat exchanger in a pressurized water reactor that is called as steam generator, which then passes the [gas] steam through a turbine that’s been a generator that then generates power electricity. After spinning the turbines, the secondary loop is cooled by the ultimate heat sink, which can be a river. It can be a sea or lake or coolant power. So the amount of coolant capability require those ultimate heat sink, is a function of how much of electricity has been generated by the turbine generator. And it has no direct connection to the temperature of the fuel in the reactor. It has a direct relation to the temperature of the coolant water that is in the reactor. That’s the one that removes the heat generated by the fuel. So the reason why a plant may need to shut down during periods of high outside air temperature is that the ultimate heat sink such as a lake or a river outside becomes less efficient. They are more than heat as the temperature goes up. For example, a lake at 88 degrees cannot absorb as much heat as the lake at 65 degrees. So that said, our fuel, the metallic fuel can be used to safely produce more heat than conventional oxide fuel. As I mentioned, because of the increase in the surface area of our fuel rod and at the same time, the fuel evaporates at an average temperature, which is 1,000 degrees cooler than conventional uranium dioxide fuel.

[Gary Sharpe:]

Okay. Next question, outside of the U.S., where is the most interest in Lightbridge fuel and advisory services?

[Seth Grae:]

Well, outside the U.S. that we’re in discussions in particularly Europe and Asia relating to advisory services, some in Africa, some in South America periodically but it's mostly Europe, Asia and bridging those to include the Middle East. Some are for countries looking to start nuclear power programs for the first time. Some are in countries that already have nuclear power and are looking to expand and maybe like starting a new utility from scratch and perhaps in the private sector that we’re talking to. Much of this is in Central and Eastern Europe and in Southeast Asia as well as in China. On the fuel, we do a great deal of work in Russia and we’re in discussions with some European countries, discussions in China, elsewhere in Russia, but really it's not going to be ultimately for Lightbridge, and I said it’s point-to-point work with utilities in those countries. We will work with few fabricator companies like Babcock & Wilcox in the U.S. and could be like TVEL in Russia and others around the world to license our patents to them. They manufacture the nuclear fuel and they work with their existing customers or new customers, selling the fuel to utilities. So the short answer on fuel is our focus is U.S. and Russia for fuel fabricators and some discussions now in China, little bit elsewhere. But those, I think will be the main nuclear fuel fabricating countries for the world, as well as some European that we’re talking to. We’ll leave it at that.

[Gary Sharpe:]

There is another question, related question. Is Lightbridge still expecting to receive technology access fees from one or more fuel fabricators?

[Seth Grae:]

Yes.

[Gary Sharpe:]

Next question. Does Lightbridge fuel works in a liquid fluoride…

[Seth Grae:]

Thorium reactor?

[Gary Sharpe:]

…thorium reactor?

[Seth Grae:]

No, our fuels are solid designs including thorium and what we call seed and blanket design where the thorium is in some of the fuel rods and then the uranium in other fuel rods. The lifter concept of liquid fuel, where thorium is, I think there is almost like tiny amounts in it, dissolved into a liquid or mix into a liquid that circulates in a reactor. It’s a very different concept that will take some time to be deployed commercially I think, well after our fuels are used in the existing reactors and new ones being built.

[Jim Guerra:]

One thing I wanted to add about the liquid, the fluoride thorium reactor. As Seth mentioned, it’s a different kind of fuel, liquid fuel versus solid fuel that’s been used in nuclear power, commercial nuclear power for 40, 50 years. Even if that liquid fluoride thorium reactor concept can be proven to be commercially viable, there are still a number of technical and engineering hurdles that program has to overcome to make it commercially viable. There’s still going to be a tremendous investment required to change the existing infrastructure, nuclear infrastructure, commercial nuclear infrastructure starting with building new type of fuel fabrication facilities, shipping containers for liquid fuel versus solid fuel, that those shipping containers used today have been designed to handle. Changes at the nuclear power plant, how the fuel is received, how it’s stored, what happens once the fuel has been irradiated. Right now the fuel is stored in spent fuel pools and with liquid fuel you have to look at all of that. So you have to change the existing infrastructure throughout the entire fuel cycle. And then on top of that regulations for licensing fuel and reactors have been designed for solid fuel. So you have to change regulations and regulator would have to be basically capable of analyzing and issuing safety approvals for this new type of fuel that they haven’t -- they are not used to. Well, that’s going to take some time and require tremendous investment to be able to do that.

[Gary Sharpe:]

We got some questions about the [SAS] [ph] involvement of the U.S. Department of Commerce trade committee, asking for observations about progress and potential of several agreements that are being worked on currently.

[Seth Grae:]

Well, the committee is called the CINTAC, which stands for Civil Nuclear Trade Advisory Committee and we advise the U.S. Secretary of Commerce on civil nuclear matters, mostly on expanding U.S. business overseas, but also on some domestic matters. We do talk about let’s call the TTIP and the TPP,, the trade agreements now being negotiated by the United States, a bit. We don't spend much time on that as a committee. I don’t think I really could give any more insight into that than what you’ve read in the press. I think that the U.S. government is very serious about wanting to enter into these trade agreements although I don’t think they particularly will affect nuclear as compared to some other industries as much.

[Gary Sharpe:]

Okay. The next question, what are the benefits of the addition of Kathleen Kennedy Townsend into the Lightbridge Board particularly internationally?

[Seth Grae:]

Well, I think the benefits are tremendous. Kathleen is in addition to being a member of the Board she is the chairman of company’s audit committee and brings in a great deal of knowledge and experience to her role on the audit committee as well as the Board. As you may know, Kathleen was the first woman Lieutenant Governor of Maryland. She was a very senior official in the Justice Department in the Clinton administration. She has a very senior position at a very large hedge fund in Washington DC. She is involved with a uranium company and she brings a wealth of experience in her judgments to the company as well as many relationships. So I think that having a director like Kathleen Kennedy Townsend -- she used to be on the company’s international advisory board. And I am glad to see someone of that talent directly on the company’s Board of Directors now which I think shows a very good direction in the company and the type of talent we can attract.

[Gary Sharpe:]

All right. I would like to have the operator pool once more for live questions please before we reach the top of the hour?

[Operator:]

(Operator Instructions) We have a follow-up question from the line of Joe Lascala of Aegis Capital. Your line is open.

[Joe Lascala:]

Hi. I just had a follow-up on one thing that you touched on earlier. With specific regards to the patent, those issued in February, which you seem to be really excited to have, calling it the most important patent in your intellectual property portfolio. And you had mentioned that you expect to pull licensing revenues off of that patent. And I believe you said that you expect the majority of your revenue to come from that patent. So I guess can you just walk us through the length in time that it might take you to start signing contracts to that regard that investors can expect to start hearing some progress, now that you own that patent?

[Seth Grae:]

Well, we expect to have progress this year. We hope in these negotiations with Babcock & Wilcox where we will have to transfer some of that intellectual property, allow them to use it for making the shorter size fuel in the existing facilities and going forward with building the plan to make the larger size fuel and similar arrangements with Russian partners and then with utilities that would use the patents. And we expect in around the 2019 timeframe to have the first commercial fuel and full size reactors in the United States called lead test assemblies, so starting in the next few months hopefully.

[Joe Lascala:]

Okay, thank you.

[Operator:]

Thank you. Our next question comes from the line of [Ken Young] [ph]. He is a private investor. Your line is open.

[Unidentified Participant:]

Yes, good morning, gentlemen. I have been following Lightbridge since way before you changed the name to Lightbridge. And I know you have probably addressed this question before but I’d like you to do again if you don’t mind. Why do you suppose that given the supposed obvious benefits of the Thorium reactor, have these not caught on seemingly anywhere?

[Seth Grae:]

Well, there is a lot of news about it recently. And one of the predecessor companies to Lightbridge started with designing a Thorium reactor. They switched to designing thorium based fuel for existing reactors. And we later invented the metallic fuel what we call the seed fuel for that and then expanded the metallic fuel to be the whole fuel assembly with an all metal fuel without thorium. There are tremendous benefits of thorium. And these include less waste from the reactor for the same amount of electricity generated; much lower toxicity of the waste generated by the reactor, and greatly enhanced proliferation resistance of the spent fuel from the reactor. And these are things that the industry now, particularly utilities are not willing to pay for. These are regarded as advantages to governance. And I think we have a combination of hydrofracking in Fukushima in particular where hydrofracking was lowering the wholesale price of electricity, for hydrofracking and other reasons, including down economic times, but a lower wholesale price of electricity overall, particularly in the United States and Fukushima putting such a strong focus on nuclear safety that where the real action is that the utilities today only seem to talk about is can you improve our economics because we are competing with gas plants using hydrofrack gas and anything we do has to improve safety, it’s like an airplane, you can’t have an idea to make an airplane more economically efficient by reducing safety, it has to enhance safety. So I think that when you look at our metallic fuel, it’s designed to just tremendously optimize in ways nothing else can the economics of the nuclear power due to power up rate and the longer fuel cycle, so it’s just cost less per unit of the electricity generated and the safety of nuclear power, with just tremendous benefits including those that stem from 1000 degree Celsius cooler temperature in the core of the reactor that Andrey talked about in the fuel. So I think the benefits of thorium are there, but the reality of the market in the United States, China, around the world, is that utilities aren’t willing to pay for something that makes less spent fuel, less toxic spent fuel, more proliferation resistance spent fuel; our fuel, even the metallic fuel does all those things, not quite to the extent of our thorium fuel design, but it does all those things none of which the utilities are telling us they will pay for. The economic analysis done on our fuel by Siemens I think mentioned those benefits but then attributes the whole royalty pay to Lightbridge coming from the economic benefit we derive -- the utilities derive from the power up rate and longer fuel cycle. So the answer I will give is that it’s a question really for utilities on what are they willing to pay for and what they are willing to pay for is improved economics of nuclear power generation with improved safety.

[Gary Sharpe:]

Follow-up please?

[Unidentified Participant:]

Yes. I can think of two countries, particularly Japan and Germany, who have had a -- because of the accident in Japan, had an extreme reaction where it would seem to me something like thorium which is something that the government themselves would be prepared to fund would be exceptional for them. It doesn’t seem like anybody anywhere no matter what their motivation is is prepared to do anything with the thorium. And I just don’t quite understand -- I understand what you are saying about the economics as far as particularly domestic utilities are concerned, but I don’t understand the attitude throughout the rest of the world, Japan has got a terrible problem and fracking doesn’t really solve their problem, because it cost a lot to get natural gas to them and it would seem to me that this would be right up their alley and yet I don’t see it.

[Seth Grae:]

Well, again, it’s what will the Japanese utilities like TEPCO pay for. And right now, what they are paying for is they are paying a fortune something like $19 per million BTU for natural gas, we pay something like $3 [inaudible] and the difference is transportation cost to Japan and they are paying to start to prepare to restart the reactors. So we do see nuclear making a comeback in Japan. I think that the new prime minister, I think all the recent elections in Japan to some degree been a referendum on whether to go back to nuclear power and the voting has been, yes. And they are electing politicians that are now starting to implement plans to restart the reactors and even a new reactor in Japan under construction now as we speak. In Germany, they are planning to wean themselves off nuclear power by 2023, whether other German governments between now and then will actually do it, we’ll see, but what we are seeing is Germany actually importing more and more nuclear power, from just on the other side of their borders from France and Czech Republic, from Sweden and we are seeing Poland considering building a reactor partly to sell electricity to Germany. So net-net, I don’t think Germany is actually using less nuclear power, they are just importing it from across their borders from several countries, and I think that's actually going to increase. I don’t think Germany is doing well with the energy policies right now and there is, for example I think it’s much more than twice as much carbon emitted per capita in Germany as in France because France has much more nuclear power than Germany and Germany is burning a lot of lignite which is much dirtier than basic coal. And if Germany is going to stop in reality being a tremendous polluter through burning lignite and through using nuclear power from across its borders, I mean we will see what happens, but there is already price pressure in Germany and I am not sure how long people are going to pay for the current policies there which is I said is really what’s driving things in Japan too. There is just so long they can pay about $19 per million BTU of natural gas when they have reactors there they can turn on and generate the electricity for a much lower cost. And I think that obviously safety as I said in addition to economics is what matters in the country that literally has Fukushima. They’ve set up a new nuclear regulatory agency in Japan. They seem to be winning a lot of public trust, I think they still have a ways to go, but in time it looks like they will get there.

[Gary Sharpe:]

Operator?

[Operator:]

Thank you. I am showing no further questions at this time. I would like to turn it back over to Lightbridge Corporation for closing remarks.

[Seth Grae:]

Well, thank you, Destiny. These are exciting times for Lightbridge. The company is well-positioned to serve the rapidly expanding global nuclear power market with our fuel designs and our expert independent advisory services. Until the next conference call, our lines are always open at [e-mail] and by telephone at 1571-730-1213. Thank you very much, and good bye.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.